If you buy anything on credit, you are living beyond your means.

[EmilyAnne]

I am so tired of hearing conservatives vilify people who are at risk of foreclosure by implying that they deserve it because they are irresponsibly living beyond their means.

Unless a person dropped a bunch of cash and paid for their house, their car, their college education and their kids' braces in full, they are living beyond their means.

It has always been up to a lender to determine how just how much beyond your means you could live. They would look at your income and do some simple calculations and, presto, you were given just the right amount of debt.

I seriously doubt that these people have "bought" homes, fully intending to just sit on their asses and not make payments because they are just lazy or irresponsible. Everyone knows what happens when you don't pay the mortgage. The outcome of eviction and the potential loss of all money invested in the house are not surprises. So, obviously, the reason they can't keep up with their payments is not due to selfishness or laziness, but rather that the simple calculations that the trusty lenders used to determine their ideal level of debt were wrong.

I don't know what the answer is to this problem. I am a renter.
Still, I don't understand the people who have no sympathy for people who are going through foreclosures.
They were misled by financial experts who were free from any government oversight.
They shouldn't have been given certain loans, but they were, trusting that the lenders knew what they were talking about.

If its not the pregnant women and children who benefit from SCHIP or the "Illegals" of California who are just flooding into our hospitals for freebies or Reagan's Welfare Queens, I guess its lazy homeowners who have brought the entire American economy to its knees. My ass, they have.

I am adding this video link to illustrate the sort of conservative BS I am talking about. Rewarding "bad behavior?" What about the Wall Street bailout?

http://www.huffingtonpost.com/2009/02/19/rick-santellis-revolution_n_168286.html

[SeeHopeWin]

1. Sounds right to me....nt

[CreekDog]

4. and there's nothing necessarily wrong with that

:hi:

[ZombieHorde]

2. I am going to school beyond my means. K&R&nt

[EmilyAnne]

3. Tsk, tsk. You must be one of those Welfare Queens! n/t

[SCantiGOP]

5. this is what saved capitalism

I remember a class in college where the professor said that Marx would have been right had capitalism not invented consumer credit, that allowed people to buy major assets such as houses with their future earnings. I think your analysis is correct.

[EmilyAnne]

41. This is such an interesting point. I have been thinking about this since I read your response to my

post yesterday and have been reading up on the history of consumer credit. Plus, reading Marx.
Thank you for such a thought provoking post.
-Emily Anne

[stopbush]

6. Without credit, nobody could afford big ticket items like homes and cars.

What's the alternative buying a house on credit? Why, paying cash...or renting a home instead...which means that your monthly rent payment is going to pay for someone else to own a property. In the meanwhile, you're paying out $XXX per month in rent that could be paying for you to own a property. If you hope to save up enough to buy a house by paying cash, well, good luck with that as you'll only be able to save a percentage of what's left after you've paid that rent. Save $100 a month toward paying cash and you'll eventually be able to buy a home by paying cash. For a house worth $200,000 it would take you a mere 166 years at $100 saved per month.

Same with buying a car. You either buy it on installment or save up to pay cash, but you'll be car pooling or paying for commuter tickets for those many years until you can afford a car, and your saving to buy a car will be minus those transportation charges you're paying in the meanwhile.

[Winterblues]

7. Bull

If you have the history and the means to pay back your loan then it is not beyond your means. People borrow all the time. Whether it is getting a friend to help you put up a shed on your property (borrowing labor) or borrowing a book for a report that is due. You borrow something you pay it back, no problem and it is in no way beyond your means. When you borrow something that you know will be almost impossible to repay, then that is beyond your means..You make it sound like borrowing is a bad thing. It makes the world go round and always has.

[EmilyAnne]

9. No I didn't. You missed the point. Maybe I didn't explain it well enough. Sorry.

[Bill McBlueState]

33. Lots of people aren't going to read very far past your subject line.

One of those annoying aspects of DU.

[Johonny]

15. I agree

Economic growth works based on borrowing and ability to pay it back.

[indepat]

8. Every lender who aided and abetted a borrower to fudge on his credit application and then sold the

mortgage knowing that mortgage would be sold and then bundled as part of a fraudulently advertised AAA security committed fraud imv. My recollection from twelve years ago is that the penalties for giving false information on a credit application are a $250,000 fine and five years in prison: those penalties should be visited upon the guilty. :P

[EmilyAnne]

10. Exactly!

[treestar]

11. The lender told them they were qualified

A big deal is made of homeownership in this society. To the point we are encouraged to go into debt for it.

Then how they can criticize people in the midst of job losses is really unkind. Is anyone's job that certain? Anyone can lose their job. So the banks might have realized that.

It's like saying no one should buy a house if they might lose their job. So the only people who can buy one are those that can pay cash for it.

And the banking and title industries would fail, too. Automakers couldn't sell - most people take out a loan to buy their car.

Ignorant judgmental Republicans at it again. Makes me want it to happen to them - they lose their jobs, etc.

[One_Life_To_Give]

14. Any Mortgage originator should be suspect

Going into debt by an amount solely because someone who makes a percentage off of getting you to sign the papers says so should always raise red flags. Thats alot like believing the used car was "only driven to Church by a little old lady".

Can I be both sympathetic and question/ point out that some of the people should have known better.

[zombiezneedluv2]

53. You are making tons of assumptions there

I was one potential person to be brainwashed by society to buy a house. Haven't done it. Even when it was 0% down, I knew there was a catch. Plus, I have never had that kind of economic stability to do so.

My partner isn't very realistic when it comes to money, so he got caught up in some stuff which messed up his credit (cell phone contract, shitty car...). Guess what happened next? You betcha! He was sent credit card applications up the ying yang. Did he bite? NOOOOOO! Because by then, he had bought half a clue and realized what was going on.

It's not so much having to be sure that you NEVER lose a job. But what about this radical notion? You have SAVED enough money for a down payment, 9-12 months living expenses (including mortgage payments, of course), and extra for UNFORESEEN home repairs??? That's all. Oh, and you make sure that you are not living beyond your means or needs. So no McMansion on a $35,000 salary!

[sinkingfeeling]

12. And have you ever noticed the number of Senators and House Members that get 'special rates' on

their loans? Also, check out some of these guys 'net worth'.

http://sunlightfoundation.com/projects/2007/fortune535/

Check out Tim Walz, he's over $363,000 in debt.

[EmilyAnne]

13. WOW! Thanks for that link!

:fistbump:

[defendandprotect]

20. We need to get some poor people into Congress ---

Remember Fannie Lou Hamer . . . ? And she never made it anywhere . . .

except into my heart!

She should have been on the Supreme Court -- !!! What a lady!!!

[City Lights]

38. Many of our nation's fattest cats get credit with 0% interest.

During the campaign, Cindy McCain was reported to have almost $500K charged on an AmEx card with 0% interest. Some special card AmEx issues for the fattest of the fat cats. IIRC, it was an AmEx Centurion card.

[seabeyond]

16. lets see, car on loan, 0%, figured i was making more leaving it in cd

almost exclusively us credit card and pay off end of month

and then of course there is buying house, simple 7% interest, and made sure i could afford payment.

[Stellabella]

26. You're still technically living 'beyond your means' because you're not paying

cash for these things. The OP is right.

[seabeyond]

32. i understand. why i posted what i did. i am not paying cash, and for good reason

in some instances and in others i easily have it covered "within" my means. saying, just cause a person uses credit doesnt mean they live beyond it

on the other hand, i do know people all levels of social scale that do chose, chose... not situation arose, but chose to live above their means. that is a reality in this nation. i dont have a lot fo empathy for those people

i do for those strugglin, working ass off, living within means and STILL, shit happens.

so i hit this crisis from many angles. it is not black and white, one way or another.

[Stellabella]

36. I understand too!

I talked to my mom today, and she was telling me about how her parents always paid cash.

But we would never have had the economic growth in this country we had over the last 60 years if there wasn't credit available.

[marew]

17. I think the issue is the wise use of credit...

The last car I bought I was preapproved for a $45,000 car. No way I would spend that on a car, ever. I bought a $17,000 car instead. There are people who get a $10,000 line of credit on a new card and go hog wild, maxing the card out very quickly. Then, by the time they pay it off by paying the minimum each month, they have paid many, many times what the item actually cost. We've all seen that.
I agree, the dishonest banks should not have been bailed out. Now that WAS rewarding bad behavior. There was a story on cable tonight about a bank chain that is doing well even now because they did not engage in that fraudulent, dishonest behavior. There must be others also. They should be rewarded and helped to expand.

[EmilyAnne]

43. Very true that the less fraudulent banks should be rewarded. Its hard for me to really get my mind

around just how interconnected this all is.

What are the implications of even the most corrupt banks going under? I have no idea.

What are the implications of letting people who were victims of predatory lenders just go into foreclosure? More useless assets seized by the banks. Certainly receiving a readjusted monthly payment from these homeowners is better than suddenly receiving nothing at all. Then the banks have to pay to have the house sold. The houses are oftentimes trashed or sit empty and neglected as pipes burst and destroy flooring. The property values of not only the foreclosed home but the houses in the same neighborhood go down.

[kentauros]

18. And if you use it for a medical emergency for yourself or your pet

you're/it's dying beyond your means? :P

[EmilyAnne]

42. And then think about the corrupt funeral industry. n/t

[defendandprotect]

19. We needed a thread like this -- thank you --

Not so long ago, one of my tires had a nail in it ---

when I got it checked the guy told me the whole tire was bad -- harmed by HEAT

because they were inflated too low!!! Now, the place I used to take it to for

checkups was always asked to check the tires, please.

Meanwhile, not only was one tire bad --- all FOUR tires had to be replaced.

More than $300 -- lickity split!

Credit card, please!!!

[lonestarnot]

21. Fuck it! I'll ride the train or the fucking bus!

[defendandprotect]

27. Meanwhile, keep your tires checked -- they need more air in summer, less in winter --

and, have someone professional check the level of air pressure you should

have -- my maintenance book was weird on what it should be.

PS: Car also feels better when properly inflated ---

and tires wear better.

[leftyclimber]

22. Yup. Those of us who are buying food on credit because it's the only way we can eat

we should all go to hell.

Never mind that the poverty line hasn't been raised since the 1960s. Never mind that it's almost impossible for people without children to qualify for food stamps, and not that easy for people WITH children to qualify. For that matter, never mind that most Americans look down on people who pay for their food with food stamps regardless of what kind of food we're purchasing.

We should all just go out somewhere and die.

That would appease those assholes.

[ffr]

23. What do we care

Might as well live for today anyway, half the population thinks Palin should have been VP.

[defendandprotect]

28. When is DU's call in day on HOMELESSNESS and POVERTY . . ????

We should be slamming Congress and the President for action

on homelessness and poverty -- specifically ---

in fact, just as Nader pointed out in a thread covering that somewhere

here at DU!!!

And, thank you, to whomever ran that thread!!

[hfojvt]

34. the poverty line gets raised every year to account for inflation

Poverty line was $6155 in 1988 and it is $10,787 today.

[Stellabella]

24. You are absolutely right.

Thank you for saying this. I am sick to death of the regular American being blamed for this mess, when it's been a repuke mess from 1980 on.

[Rosa Luxemburg]

25. conservative voters are already foreclosing

so the right might shut up soon

[BlooInBloo]

29. Often true, but by no means always.

[EmilyAnne]

40. Technically, I think it is always true. A lender takes a look at a person's income and credit

history, then decides exactly how much in debt that person can be. The predatory lenders that are at issue with a lot of these foreclosures took a look at a victim's income and credit history and came up with a bogus amount of debt that person could be in. Its as simple as that. People who are in debt are technically living beyond their means at the level that a lender decided was appropriate.

[BlooInBloo]

50. No, it just not always true...

I might have plenty of cash to buy some big ticket item, but simply choose to use credit.

One obvious reason this might happen would be if the opportunity cost of using cash were higher than the interest rate charged by credit.

If I have the cash to purchase an item outright, then it's not beyond my means. Even if I choose to use credit for it.

[OmahaBlueDog]

30. IIRC, this is basically the Dave Ramsey philosophy

His view is the only thing you should borrow to buy is the family home, and that should be paid off ASAP.

[Bryn]

31. Where the hell is the cavalry on this one?

for us people who have been hurt by banks and are struggling whilst banks/wall street got bailouts and are partying! I just got a letter from Capital One telling me they are raising my interest rate from 12% to 22.9 due to "economic reason..blah blah..." even though I was never late paying them! This is so wrong.

Stop Bank of America and other mega banks from robbing us with those overdraft fees by holding deposits or posting credit forever, but are quick to debit within seconds!

[Greyhound]

35. Exactly, without the corrosive effect of what we call credit the economy is

self regulating. Of course there are bumps and corrections along the way because it is impossible to always have a precise balance between currency and demand, so sometime there is too much currency in circulation and we get inflation and sometimes there is not enough and and activity slows, but the system is self correcting with time.

Without credit nothing can be "worth" more than people can afford to pay for it, as a chart displayed in another thread today, showing the relation to house prices relative to median income, demonstrates. House prices begin to out-strip income with the availability of credit which lead to the necessity of credit which allows further increases in the price of housing, and so on.

It is the wide spread use of institutional credit that allows the economy to get so out of balance that the boom-bust cycle exists on the scale we regard as normal today. It is also the mechanism that has allowed the tiny number of social parasites to steal so much of our wealth for themselves.

"Let me issue and control a nation’s money and I care not who writes the laws." - Mayer Amschel Rothschild

[Mike 03]

37. This is a lovely post. Kick and Rec.

Ooops, sorry, on edit, the post is too old to rec. But it is a wondeful thread.

Thank you.

[AngryOldDem]

39. Thank you for this.

I thought about posting something similar earlier. The more I thought about the argument against the foreclosure assistance -- that it would send the "wrong message" that it would be fine to go out and live beyond one's means because Uncle Sam would come to the rescue -- the more insulting I found it. I would say that most of those who are in the most danger of foreclosure are hard-working people who have found themselves in dire straits through no fault of their own.

Who would I trust with bailout money -- a Wall Street exec who thinks the world owes him a living, or a soon-to-be or actually laid-off auto worker whose fighting to the teeth to keep his family's head above water?

As I said in an earlier post, it's immaterial to me just how people have found themselves in this situation. They need help, and they need it now.

[TripleKatPad]

44. I have mixed feelings

I feel great empathy for those who have lost their jobs or faced medical emergencies or whatever and find themselves in a situation not of their intentional making.

Another part of me feels anger for those who used their houses like an ATM to live the good life, a life beyond their actual means. They may be few here on DU, but they exist.

Ultimately I lean toward helping any and all, no matter their perceived "bad" behavior. The alternative will drag all of us down the rat hole.

Dang, it's hard being an aging-hippie-pinko-liberal-commie-socialist-fascist-ObamaFiend.

[Fire1]

55. "those who used thier houses like an ATM to live....." Many

people across this country were told just that, by so called real estate experts, and people believed it! They 'refinanced' themselves into one giant hole.

[SeattleGirl]

45. I'm with you on this, EmilyAnne

There are so many homes in foreclosure now, or on the verge of foreclosure. No one, NO ONE, can convince me that every single person who has lost their home, or are in the midst of losing it, are lazy asses who just feed off the system.

People are losing their jobs, they are losing their health insurance, they are losing everything, and it's not their fault. It's the fault of companies who outsource jobs overseas, and insurance companies who hike their rates so high that companies can no longer afford to insure their employees, and crooked banks and mortgage lenders.

I'm sure there are some lazy-assed people out there who do think they shouldn't have to pay for what they have, but I'd bet anything that they are a very very small minority.

I feel extremely fortunate that I got a really good job in October, especially because MrSG got laid off in December. In some households, both breadwinners have lost their jobs. What the fuck are they supposed to do?

This whole situation didn't have to happen, and for those who look down their noses at those who are in trouble, I say, fuck you!

[and-justice-for-all]

46. well damn it, I had to charge my car insurance...

"am so tired of hearing conservatives vilify people who are at risk of foreclosure by implying that they deserve it because they are irresponsibly living beyond their means." same here..

You never hear those same fucking Conservative fascist bitching about Corperate Welfare!!

[blues90]

47. Even with the best intentions there are 1,001 ways things can go wrong

I think of all the people who bought a home they could afford then either through job loss or illness that is not covered they resort to what they can hoping things will improve and then their interest rates get jacked up.

We never bought a house or a new car because we knew we could not aford them but we had some crdit card bills that we made double payments on then they raised the min to a double payment and raised interest rates then I lost my job and now becuse of this we are in shits creek.

If we would have for seen any of this we would never used the damn cards. These were not high dollar items. Most was dental co pays and medical copays.

[TheCentepedeShoes]

48. I just dug up Mr 'pede's

Little Green Book (Comprehensive Mortgage Payment Tables) dating from 1978.
It figures your monthly payment amount for various interest rates of 7% to 18% (gasp) and for years of 1 to 40
The highest loan amount in the book is $100K but you can still use it compute a higher amount to a pretty close number.
Edit: forgot to say I don't know how to compute the monthly based on an interest rate lower than 7%, might be a math problem to play with

[Little Star]

49. Sorta reminds me of....

the old adage, people who live in glass houses shouldn't throw stones. Most of us live beyond our means in one way or another. Bravo to you for posting about this!

[dysfunctional press]

51. and here i thought that i was doing it for the airline miles...

:shrug:

[Generator]

52. Of course the exception is those

that paid nothing, and I mean nothing to get their house. I don't think ZERO down loans should exist-of course I'm all for low assistance and paying closing costs. But if you can't even say a dime to buy the most precious thing you have-a home to live in then you can't afford it. And you walk away losing nothing. You are correct if we lose our jobs and can't pay our mortgage we are out savings and down payment, and those horrendous "closing costs".

Of course I think there should be CAPS on interest rates. Houses are so damn expensive anyway and all the banks do not need to make Maximum more than 7% interest on them. Imagine REAL regulation. YES, you have to make a down payment. YES, the house is not to make Mr. Wall street dude a millionaire.

Also-I think people should actually buy a house to you know, LIVE in it. FOR YEARS. The banks know people move all the time-you cannot break even on moving into a house unless you live in it for five years.

And it goes back to the down payment-if you actually put 20% down-which is of course hard to come up with or near impossible in some markets-it makes it really hard to be underwater. And that is why yes, it the way to go. We had to live in our first house for seven years (FHA) to afford to get enough for a down payment of 20%. FHA is another kind of bank rip off because they charge you mortgage insurance premium every month on top of the down payment of mortgage fees-it was like $2500 in our case. It's complicated but of course, if every one had to pay in full to get a house home ownership would only be for the rich like it was a hundred years ago.

OF course your main point, some vulernable people were sold a bill of goods. They wanted to believe they could afford it when they could not. The Republican mantra is it is always your fault no matter what happens. Life is for the winners. The losers are just whiners and we should let them suffer. That is the Republican philsopohy.

I still say if they lowered all mortage interst rates to a cap of 7% that would be a start. But GOD FORBID we cut into Mr. Bank rich man's profits.

[Fire1]

54. I, too, am sick to death of this mantra that exists right here on DU

and have voiced my opposition on many posts.